Leading with Diversity, Equity and Inclusion

Successful leaders are undertaking initiatives to address Diversity, Equity, and Inclusion (DEI) within their organization to assess company culture, structures, practices, and policies – in particular, ones that create bias and an uneven playing field capable of causing damage to organizational health and performance.  The need for diverse talent in the workplace is evident with a clear correlation between DEI practices and organizational effectiveness.  Now, more than ever, it is necessary for executives to develop a shared vision, create learning environments, and embrace these initiatives – both for the sake of ethics and because this is what it will take to compete in the future.  Let’s discover more about DEI and why it is important to an organization’s health.

What is Diversity, Equity & Inclusion?   

  1. Diversity is about the presence of difference within a group. This is where differences of race, ethnicity, sexual orientation, gender/gender identity, and religion should be considered for their presence at all levels within the organization.
  2. Equity is all about ensuring equal access to the same opportunities. This is the proverbial “equal playing field” and where barriers to opportunities or resources need to be eliminated. In order to achieve a fairer workplace, it is essential to observe unconscious bias in policies, practices, structures, and resources.
  3. Inclusion is about cultivating a culture that invites and encourages the feeling of being welcomed, valued, and incorporated into the workplace. Inclusion can be more difficult to address because the overall culture of the organization largely determines it. This means that discovering the root causes behind a lack of inclusion can be harder to pinpoint. 

3 Reasons Why Companies Should Embrace DEI 

Among the many reasons to address the issues of Diversity, Equity, and Inclusion (outside of the ethical perspective that it is the right thing to do) there are three that stand out:  

  1. “War for Talent in the Workplace”There is now, and will continue to be for the foreseeable future, a war for talent in the workplaceThis has only been reinforced during the post-Covid “Great Resignation”.  DEI programs address bringing more diverse talented employees into the organization while also increasing retention as it makes it a more attractive place to contribute to and grow inA high performer is more likely to select an organization that has an aggressive DEI program and is more likely to stay because that program allows for them to make a significant difference and values their development.
  2. “Diverse Organizations Outperform Peer Organizations”There is ample evidence that more diverse organizations outperform similar, but less diverse organizations.  A recent McKinsey study found that diverse organizations outperform industry averages by 33%.  This Is because those organizations that can take advantage of diverse teams will have insights and opinions with that are more accurate and nuanced to the environment than ones from a more uniform perspective.  In addition, teams that can take advantage of diverse knowledge and experience are more innovative and creative as their diverse viewpoints help them come at problems and solutions from different perspectives.  Clearly, organizations that serve ever wider and more diverse consumers will be less likely to understand their customers’ needs and perspectives if those same demographics are not present in the organization serving them.
  3. Outside ExpectationsThere is mounting pressure for reporting diversity numbers and DEI programs with mandatory Environment, Social, Governance (ESG) reporting for the SEC.  In addition, activist investors are also demanding that organizations make significant progress in addressing inequity and lack of diversity in their investments.  There is also evidence that consumers are increasingly making buying decisions based on issues such as commitment to sustainability and equity. 

What should DEI efforts consist of?   

Diversity is perhaps the easiest concept to understand and measure as it can be accomplished by surveying the organization. Race and gender are typically easier to measure, whereas traits like identity can be more difficult, requiring a more nuanced approach with involvement from the broader organization (most importantly by those who are in those categories). Typically, initiatives include at least some of the following: 

  • Key Metrics – Identification of where they are on key metrics such as employee diversity, retention, representation in key leadership positions, and defining what they intend to achieve by instituting a program. 
  • Training – Global training on unconscious bias and its impacts on relationships, participation, and performance serves as a baseline for further efforts. 
  • Policies and Procedures – An assessment of policies and practices in the organization which might provide barriers for recruiting and retention, inclusion, and creating an unequal playing field should be conducted and addressed. 
  • Mentorship and Sponsorship – Another key element is the creation of mentorship programs that attend to the particular barriers that diverse employees face, including a special emphasis on diversity in high-potential programs. Sponsorship Is advocacy for Individuals to be Included In opportunities to gain experience and visibility. 
  • C-Suite Positions – A focus on ensuring a presence of diversity in the C-Suite and Board of a company is necessary from the start to show commitment and provide advocacy for the program.

Culture is Key 

A genuinely successful DEI program not only hinges on the design of the initiatives but on the culture that it is embedded in. Cultures emphasizing learning and growth far outpace organizations emphasizing authority, control, rules and tradition.  Leaders need to develop a shared vision to be a “learning organization” that provides the space to understand and accept the realities of the current state, then commit to finding avenues to change toward that vision.  The CEO and executive team have the most influence over changing aspects of the organizational culture. Truly, the executive leader must commit to exemplifying the change that is desired for the organization. Changing the culture is a long-term effort that demands that the Board support it and the leadership team must be willing to both embody the change and provide the Initiative to enact It. 

In Conclusion 

It is the primary duty of the leadership of any organization to create an overall safe, welcoming workplace environment for those of all races, creeds, identities, and ethnicities where everyone’s contribution is appreciated and promoted.  To do this the CEO and senior leadership will need to take that intention and do the hard work of actualizing this by uncovering implicit bias in practices, structures, and allocation of resources and create the platform for all to provide their contribution.  Forward-thinking leadership is now taking up this challenge and leading the charge. 

 


This post was written by Jeff Wyatt
jwyatt@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

Build Your “A” Team for a Successful Transition

Two business colleagues having a discussion in office

The transition of company ownership, whether internal or external, is a complex process. At DWH, we often work closely with business owners who are contemplating an ownership transition. Today, we’re providing an outline for building an “A” team that can make all the difference in ensuring a smooth, successful transition (as opposed to one that is chaotic and unsettling)

Suggested members of a strong advisory team include: 

  1. Succession/Transition Advisor – This advisor supports the business owner by developing a transition plan, which includes the identification of opportunities to maximize the business’ value, and then helps facilitate the execution of the plan. 
  2. Mergers & Acquisitions (M&A) Attorney – Transactions can have a significant amount of legal complexity, so engage with an attorney that specializes in M&A activity in your industry and can support your team throughout the process. 
  3. Certified Public Accountant (CPA) – Many owners do not consider the impact of taxes on the proceeds from a transaction until it is too late. Have a CPA with M&A experience get involved early in the process. 
  4. Wealth Advisor – The wealth advisor works with the owner to develop a plan for managing the proceeds of the sale to achieve ownership goals.   
  5. Estate Attorney – In conjunction with the wealth advisor and CPA, an estate attorney can help an owner and their family establish a structure that minimizes taxes and protects wealth for the current and future generations. (We will cover estate planning in-depth in a future article.) 
  6. Investment Banker – The investment banker will help prepare offering documents, bring the company to market, vet potential buyers, and guide the company through the sale process. 
  7. Valuation Advisor – Many transactions fall apart due to misalignment in the purchase price. The valuation advisor provides owners with a comprehensive valuation of their company based on the company’s performance, asset valuation, and/or market comparisons. (We cover business valuation methods in this article.)

Key Takeaways

By assembling an experienced team of advisors to provide support through the transition and transaction, you’ll gain the satisfaction of knowing your company is in good hands. Owners should have an experienced team of advisors in the transition of ownership to assist with:  

  • Determining the desired outcome of a transition; 
  • Cultivating a mindset of transition thinking from an owner’s point of view while focusing on maximizing the value of the business; and 
  • Understanding the value of the business and the ways to maximize it; increase cash flow and minimize risks. 

Additional Reading

 

To learn more about our strategies for Growth & Transition, click here.

 


This post was written by Heather Gardner
hgardner@dwhcorp.com | LinkedIn

All companies experience change.
Plan for it with us.

 

The Importance of Transition Before Transaction in a Family Business

Business colleagues discussing work

A transition is defined by Dictionary.com as “the process or a period of changing from one state or condition to another.” When most family business owners and their advisors think about succession planning or the sale of a business, the focus often becomes how to structure or transact “the deal”. The structure of any transfer of ownership in a business is very important and owners should have qualified advisors to help them consider the valuation, legal, tax, and financial implications of any deal. However, the value of a business is derived from its ability to generate and sustain positive cash flow. Therefore, before a business can have a successful transaction (sale or partial sale), it is important to have a successful transition. A business must focus on transitioning leadership, knowledge, and relationships and establish strong financial controls prior to the transaction taking place in order to maintain and increase the value (cash flow) of the business.

Leadership

In their book Built to Last, authors Jim Collins and Jerry Porras identified management development and succession planning as a key differentiator between visionary companies and their peers. These visionary companies often began planning for leadership transitions as soon as a new leader would start! For family businesses looking to sell or transition to the next generation, leadership transition is critical. Businesses must have a plan in place to gradually transition leadership responsibilities from the current generation (or leaders) to the next generation (or leaders) prior to a transaction. This will allow the business time to evaluate the new leaders and ensure a smooth hand off of responsibilities prior to the existing owners exiting the business.

Knowledge

Many family business owners have grown up in their business and know elements of the business better than their employees. Owners have critical knowledge that must be passed on to the next group of owners and leaders. This knowledge might include the history of the business, strategic planning, new product development, critical processes or systems, or understanding of the competition. These are pieces of information the next group of leaders or owners will need in order to continue the success of the business. Therefore, it is critical the knowledge is transferred from the current owner to the next group. This process will take time and should be planned out.

Relationships

Owners often have long established relationships with key stakeholders in their business. These relationships include customers, vendors, investors, lenders, and employees. However, these relationships could also be with key advisors, such as CPAs, lawyers, and consultants, or key community stakeholders. All of these relationships took time to develop and are important to the continued success of the business. Understanding that relationships take time to build, it is important the business develop a plan and timeline for transitioning these key relationships to the next group of leaders to ensure continuity and establish a process for educating the new leaders on the history of these relationships.

Financial Controls

Transactions are usually a leveraging event for a company. The company or new ownership takes on debt in order to buy some or all of the company from the previous owners. This increase in debt requires the company to have a strong balance sheet and sustainable cash flows in order to service the debt and the ongoing business. How can you ensure a transaction will be successful? Make sure the business has strong financial controls in place. These controls include regular, accurate, timely and relevant financial reporting, a 13-week cash flow forecast, separation of duties, and an effective finance and accounting team. These controls will help protect a business’ balance sheet and cash flow during and after the transaction.

The sale of a family business, to an external party or the next generation, is a significant event. The more a business focuses on transitioning leadership, knowledge, and relationships, and establishing strong financial controls prior to the transaction taking place, the better the chances of a successful transaction.

If you would like to discuss transitions related to family businesses, please contact us.

If you found this topic interesting, our strategic partner, JACO Advisory Group published content you may find relevant as well: Family Business Planning – Preparing the Next Generation to Lead and Who Should be Next in Line to Lead the Family Business?